European financial stocks rise in January

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FINANCIAL stocks across Europe staged a remarkable rebound in January as the Eurozone stabilised.

Progress on sovereign debt issues and the success of the €5bn (£4.3bn) European Financial Stability Fund bond issue last week proved a powerful driver for financial stock indices, which outperformed all other sectors.

The FTSE Eurofirst insurance index gained 9.53 per cent and its bank index was up 7.6 per cent, while its financial services index also added 6.74 per cent. Europe platform’s insurance index gained 9.4 per cent and its bank index climbed 8.3 per cent in January – their best performances since at least 1998.

The gains beat January’s overall trend. The FTSE Eurofirst climbed just 0.81 per cent as key sectors such as food and beverages posted declines of up to 6.96 per cent, and the Stoxx Europe 600 gained just 1.2 per cent.

“The financials have followed the sovereign debt markets much more closely than others in the corporate space,” said Evolution Securities analyst Elisabeth Afseth. “The perceived stability has allowed them to perform.”

But fund managers said stocks could still fall as investors digested more regulation or stress tests. “It’s going to be a volatile year,” one said.